LIVESTOCK-Fund buying extends U.S. hog futures' gains

Fri Oct 4, 2013 4:28pm EDT
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* Tight supply expectations boost CME live cattle
    * Feeders follow live cattle futures higher
    * Tyson to price hogs using private industry data

    By Theopolis Waters
    CHICAGO, Oct 4 (Reuters) - Chicago Mercantile Exchange hogs
on Friday gained for a third day in a row as fund buying stirred
short covering, traders and analysts said.
    Spot October hogs' discount to the most recent exchange hog
index on Tuesday at 96.38 cents per lb motivated buyers. And 
buy-stops were triggered after nearby CME hog contracts broke
through moving average resistance levels.
    Spot October finished at 91.850 cents per lb, up
0.550 cent and slightly below the 10-day moving average of 91.92
    Most-actively traded December closed 0.850 cent per
lb higher at 87.625 cents. It ended above the point at which the
10-day and 20-day moving averages converged at 87.33 cents.
    Futures rose in the face of a seasonal increase in supplies.
More hogs could pressure cash hog and wholesale pork values.
    Packers on Friday processed an estimated 418,000 hogs, up
4,000 from last week. The industry is expected to slaughter
about 56,000 head on Saturday, according to analytical market
research firm Urner Barry.
    Terminal and direct cash hog prices on Friday were steady to
weak, industry sources and hog buyers said.
    Tyson Foods Inc, the country's largest meat
processor, plans to use an alternative system to calculate how
much it should pay hog producers after the U.S. Department of
Agriculture suspended market data following the partial shutdown
of the federal government.   
    "The lack of USDA market information can make the market go
into areas and zones that make no sense," said Linn Group
analyst John Ginzel.
    Futures investors worry that bullish traders might liquidate
their massive long positions if the U.S. government's closure
extends past the Oct. 17 deadline for raising the U.S. debt
    Traders bought deferred hog contracts with the view that hog
farmers can decrease production if corn prices move higher.

    CME live cattle finished higher in anticipation of tighter
supplies in the weeks ahead, traders said. 
     October closed up 0.625 cent per lb at 128.050
cents. December finished at 132.425 cents, 0.650 cent
higher, after peaking at its highest level in nearly eight
     The October contract has accounted for this week's cash
cattle trade and traders look for fewer cattle ahead, U.S.
Commodities analyst Don Roose said. 
    Cash cattle in the U.S. Plains traded at $125 to $126 per
hundredweight (cwt), steady to down $1 compared with last week,
feedlot sources said.   
     Roose said beef demand should improve as cuts more
associated with cooking indoors tend to help drive up wholesale
beef values.
     Urner Barry quoted Friday's wholesale choice beef price, or
cutout, down 2 cents per cwt from Thursday at $192.31. The
select price rose 50 cents to $176.73.
     Packers this week resisted spending more than necessary for
supplies while grappling with poor margins. 
     Estimated margins for U.S. beef packers on Friday were a
negative $41.95 per head, compared with a negative $40.90 on
Thursday and a negative $7.85 a week ago, according to 
     Traders await the first notice day for deliveries on
Monday. The CME on Wednesday said those deliveries against
October futures will not be affected by the partial government
     CME live cattle buying pulled up feeder cattle contracts.
     October feeder cattle ended up 0.350 cent per lb at
164.450 cents. November settled at 165.950 cents, 0.325
cent higher.